Overland Park crafts a reasonable TIF policy

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Tax-increment financing has been at the forefront of local news for the first time since former Kansas City Mayor Mark Funkhouser successfully made it a campaign issue in the 2007 election.

Funkhouser, as Kansas City’s auditor, had issued blistering reports prior to his short political career about how TIF money wasn’t being properly tracked and how the development tool fell short on many of its promises. After years of former Mayor Kay Barnes’ lavishing TIF on downtown and elsewhere, Funkhouser connected with voters who wondered whether developers were getting too much help from City Hall. 

Before Funkhouser, TIF followed the loose strictures of Missouri law that established the development tool, but the city itself lacked much of a policy itself where it should be used and how. 

Nowadays, TIF is at the center of an ongoing debate between Kansas City Public Schools activists who are unhappy about the prospect of future taxes being diverted for the benefit of philanthropist Shirley Helzberg, who wants to build a new headquarters for architecture firm BNIM in the Crossroads.

In Overland Park, where TIF is used far less than it is in Kansas City, Missouri, city leaders have passed what looks like a sensible policy governing how and where TIF should be used.

One of its chief tenets establishes that a development project shouldn’t receive more than 30 percent of its funding from TIF. (Helzberg’s TIF in the Crossroads covers 38 percent of the project’s costs.)

It also spells out targeted areas where TIF should be used. In Overland Park, those areas are where pockets of disinvestment have occurred as that city’s wealth and newer development has migrated farther south outside the Interstate 435 loop. They include downtown Overland Park, the Vision Metcalf corridor and areas of the city along Shawnee Mission Parkway.

It also puts a premium on offering TIF to projects that will bring new types of businesses to Overland Park rather than those that shuffle existing companies around the city. The policy gives preference to projects of scale, namely those that are larger than 100 acres.

The policy also discourages the city from guaranteeing debt for TIFs that are financed through bonds. KCMO used to do this from time to time, ending when the city pledged its full faith and credit behind the bonds supporting the Power & Light District. The Power & Light District has since performed far below projections, meaning that taxpayers pay off bondholders to the tune of roughly $12 million a year.

Finally, Overland Park’s policy encourages developers to consult with taxing jurisdictions like school districts early on in the process. TIF redirects all future growth in property taxes within a development district back to the developer. That makes TIF a sensitive issue for school districts and counties that are affected by the mechanism. (In Kansas, school districts have veto rights on TIF plans.) In KCMO, there are times when TIF is negotiated to the exclusion of taxing jurisdictions until after a project is announced. In those cases, taxing jurisdictions negotiate from a position of weakness.

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